Can an Heir Be a Co-trustee of the Trust?

By Christine Funk, J.D.

Can an Heir Be a Co-trustee of the Trust?

By Christine Funk, J.D.

The heir of a trust can be named a co-trustee, though it can complicate the management of the estate while the grantor is alive. A valid revocable living trust must identify three parties. These are the grantor—the person whose assets are involved, the trustee—the person who is in charge of the assets, and at least one beneficiary (also known as an heir)—the person or people who receive the assets once the grantor passes away. Most often, when creating this kind of asset protection, the grantor also names themselves as the person in charge of their assets. This allows them to continue to manage their estate.

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Heir and Successor Co-trustee

A more likely scenario occurs when the grantor names someone as an heir and as a successor co-trustee. Individuals with this designation are the ones that step in to manage the assets of the estate after someone has passed away or become incapacitated.

It is possible for the grantor to identify a beneficiary and assign them this additional role, however, there are certain pitfalls that to be aware of and proactively plan for in these situations.

Minimum Requirements

State laws define the minimum requirements for anyone who takes on these estate planning responsibilities. One common requirement is that those named be of legal age, which, in most states, is 18 or more years of age.

Additionally, those named must be considered mentally competent in order to perform their duties. Those named should also be legally able to own and manage the property, as they may need to do so as part of their responsibilities.

Various Duties

Once the grantor passes away or becomes incapacitated, the successor trustee or co-trustees are in charge of managing that person's assets on behalf of any beneficiaries. These individuals thus owe a fiduciary duty to the heirs, meaning they must act in their best interests—not their own—and follow the terms of the legal document.

Some trusts are very specific, guiding the distribution of property to heirs with statements such as: "Each of the two beneficiaries shall receive one-half of one-third of my estate at the time of my death, with another one-half of one-half of the remainder 10 years hence, and the balance 10 years after that." In that case, the funds must be distributed on the schedule listed.

Potential Concerns for a Beneficiary Co-trustee

If a person is responsible for managing someone's assets after they die and is also an heir, they may be more motivated to manage the property in the trust wisely. On the other hand, a beneficiary co-trustee may not have the financial acumen necessary to safeguard the assets in the estate in a way that is beneficial to both beneficiaries.

Additionally, a person managing the deceased's assets sometimes has to make difficult decisions. For example, imagine the bulk of the estate is in the value of the family's art collection. The co-trustee may find himself in a position to enrich himself by choosing to distribute the more valuable art to himself or hiring an estate art appraiser who agrees to assign lower than market value to the art.

One way to avoid these concerns is structuring the trust agreement in such a manner that the heir who is also managing the estate cannot make decisions or distribute property on his own or related to him as an heir.

When creating a living trust, there are a number of important decisions to make. Think carefully about who you trust with the responsibility of managing your property after your death, and any potential conflicts that might arise if they would also benefit from your estate.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.